Which Australian property market is expected to see an average capital growth rate of 7.39% per annum over the next eight years? And which market is only being tipped to grow by a paltry 0.46% each year? Read on for the results. You may well be surprised.

Houses in New South Wales will be the standard bearers for Australia’s property market over the next eight years, according to the latest predictions from Residex, but Sydney has been pipped by its regional rivals when it comes to the data provider’s number one tip.

Perhaps surprisingly, houses in the ‘NSW Country’ take the top spot with the prediction that the median price in this category will rise by 7.39% pa over the next eight years. Sydney houses take second place with a 7.32% prediction.

The Brisbane house market is tipped to be the third best performer, with its average annual growth prediction over the next eight years of 6.55%, and Residex CEO John Edwards is upbeat about the city’s prospects.

“It seems to us that by September, or perhaps even a little earlier, we will be able to report growth in this market again. The rental yield for houses is a respectable 5.1% and our projections as to future median growth, while not outstanding are respectable,” he said. “This is definitely a market which is now worth exploring for bargains and future quality returns.”

The next highest predictions for average annual growth go to NSW Country units (6.07%) and Qld country houses (6.06%).

At the other end of the scale, units in the Vic Country category are seen as something of a no-go zone with their average annual growth prediction of just 0.46%. SA Country units take the second-bottom spot (0.95%), followed by Adelaide units (1.18%) and SA Country houses (1.3%).

Click here to see the full list of predictions, as well as the latest capital and rental growth statistics from Residex.

On the rental yield front, Edwards noted that yields remain lower than what they need to be to attract significant investment activity, and had a few choice words about the standout rental growth that has been seen in Perth.

“Perth remains the standout performer with rentals for the median house increasing by $65 per week and $30 per week for units. This is significant when you consider the amount a tenant must cover by way of a wage rise to meet the increase. On a before tax basis, a tenant has to get an increase in wages of approximately $4,330 to meet increased obligations for house rentals and a more affordable $2,000 for a unit. The unit increase is probably more affordable as it is close to being equal to an inflation increase in wages,” he said.

Overall, however, he believes that Perth, Brisbane, Darwin and Sydney are worth keeping an eye on, but offered a few words of caution to keen investors – notably that cash flow will be vital.

“In short, things have improved but there are some new forming “storm clouds” on the horizon. Notwithstanding the potential storm, it is time to start looking at the Brisbane, Perth, Darwin and Sydney markets for opportunity,” he said.

“In saying this, investments at this time should be made with an eye to cash flow and conservative gearing given the potential for some global international shocks. This process will ensure a positive cash flow outcome if any of the potential negative situations eventuate and interest rates decrease, hence even in a poor outcome the investment will look after itself and produce cash while you wait out any storm.”

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